« Top Headlines » Open DEMAT Account in 24 hrs  Income Tax Calculator FY 2023-24: How To Know Your Tax Liability Online On IT Dept's Portal?  BackBack Income Tax Act amendment on cards on tax treatment of MSME dues  ITR-1, ITR-2, ITR-4 forms for FY 2023-24 available for e-filing. Check details here  Income tax slabs FY 2024-25: Experts share these 8 benefits for taxpayers in new income tax regime  How To File ITR Online - Step by Step Guide to Efile Income Tax Return, FY 2023-24 (AY 2024-25)  Old or new tax regime for TDS on salary? This post-election 2024 event will impact your tax planning  What Are 5 Heads Of Income Tax?  Income Tax Dept releases interim action plan for FY25 on tax collection, refund approvals   Income Tax Return: 5 lesser-known tax-saving tips from Section 80  Income Tax Return: 5 lesser-known tax-saving tips from Section 80  Why you need not rush to file your ITR immediately «  Tamil Nadu announces tax exemption on computers... CAs may soon be able to keep books in US, Australia &... » Insurers face tax axe, policy cost likely to rise August, 24th 2006 Service tax has come back to haunt life insurance companies. The Central Board of Excise and Customs has said that insurance companies should pay service tax for providing asset management services. An imposition of service tax on asset management would either increase charges for policyholders or add to the life insurers losses. The Central Board of Excise and Customs has said that insurance companies should pay service tax for providing asset management services. For insurance companies, the bigger problem is that of changing their systems. Insurers have already had to change their systems twice. The first time was when service tax was applied on life premium, and the second time was when Ulip guidelines were revised. The tax authority has asked several Mumbai-based life insurance companies the extent of their income from asset management. Some companies have taken the stand that the charges levied on policyholders are not asset management charges. The department, in turn, has told them to sign a declaration that no asset management charges are being levied. Private life insurers manage close to Rs 20,000 crore mobilised through sale of unit-linked insurance policies. The fees on this range vary from a low of 0.5% for group retirement benefit plans to just below 2%, depending on the type of scheme. Mutual funds pay service tax on the asset management fees that they receive. Insurance companies pay service tax only on the risk premium the charges levied for providing life cover. Service tax on life insurance premium was first proposed by then finance minister Yashwant Sinha four years ago. It was later fully withdrawn by Jaswant Singh when he was the finance minister, only to be reintroduced on risk premium. Fund management or administration charges are more relevant to unit-linked insurance. In traditional policies, there is no asset management charge as all the premium goes into a central life fund. All charges are deducted from the life fund and any surplus is distributed to policyholders in the form of dividend or bonus. For insurance companies, the bigger problem is that of changing their systems. If the service tax is to be passed on to the policyholder, it has to first figure out the value of his holding. Since this can be ascertained only after he pays the premium, the tax can be collected through cancellation of units. Insurers have already had to change their systems twice. The first time was when service tax was applied on life premium, and the second time was when Ulip guidelines were revised.